What is a FEIN? Is it different from an EIN? What tax identification numbers should I pay attention to, anyway?

Navigating identification numbers may seem complex, but it's essential for tax preparation. This discussion aims to make things clearer, breaking down the terminology and explaining the importance of different tax ID numbers. Whether you're a tax preparer sorting out your own IDs or helping clients, we're here to simplify the process and empower you to confidently handle tax identification numbers.

What is a FEIN?

FEIN stands for "Federal Employer Identification Number," and it is often referred to simply as an EIN (Employer Identification Number). It is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to business entities for identification. This number is essential for most businesses, serving as a critical element for federal tax purposes, including employment tax reporting. It is a mandatory requirement, particularly for businesses with employees or those operating as corporations, partnerships, or limited liability companies (LLCs).

What is an Employer Identification Number (EIN)?

An Employer Identification Number is the same as an FEIN.

What is a Preparer Tax Identification Number (PTIN)?

The Preparer Tax Identification Number is a unique identifier designated specifically for tax return preparers. You are required to have a PTIN if you are paid to prepare—or assist in the preparation of—federal tax returns. Obtaining a PTIN ensures that tax preparers are properly recognized by the IRS, facilitating compliance and accountability in the tax preparation industry.

What is a Social Security Number (SSN)?

A Social Security Number is a nine-digit number that is unique to the individual and issued by the Social Security Administration. Typically used for personal tax purposes, it becomes especially relevant in certain business structures where an individual serves as the sole proprietor. While primarily associated with personal taxation, it may be required in instances where an individual's personal and business finances are closely intertwined, such as in the case of a sole proprietorship.

What is an Individual Taxpayer Identification Number (ITIN)?

The ITIN is issued by the IRS to individuals who need a U.S. taxpayer identification number but are not eligible for a SSN. This identification number is pivotal for federal tax purposes, specifically when filing tax returns. ITINs are typically assigned to individuals such as non-resident aliens, spouses of non-resident aliens, and dependents who may not be eligible for an SSN.

What is a State Tax Identification Number?

Certain states may issue their own identification numbers for tax purposes. To determine whether a separate State Tax Identification Number is necessary, it is imperative to consult with the state's revenue agency. The specific requirements and procedures for obtaining this state-issued identification may vary, and checking with the relevant state authority ensures that businesses comply with state regulations and fulfill any additional obligations related to state taxes.

Great! Can you tell me how to get a tax ID number?

Now that you understand the differences between these common tax identification numbers, you may be wondering how to go about obtaining each. You will need some of these numbers for your tax practice, and some you will need to get from your clients for their own tax returns. Let's look at how to acquire each of the tax identification numbers we reviewed above. 

Getting an Employer Identification Number (EIN):

The most convenient way to obtain an Employer Identification Number is to apply online through the official IRS website at IRS.gov. The online application is user-friendly and widely accessible for most applicants. However, if online submission is not suitable, alternative options include applying by mail or fax. This involves completing Form SS-4, providing the necessary information about your business, and submitting the form to the IRS via the specified mailing address or fax number.

Getting a Preparer Tax Identification Number (PTIN):

To obtain a PTIN, navigate to the IRS website and complete the application online. The application process typically entails providing personal information, details about your professional credentials, and specific information about your tax preparation business. It's important to note that there may be a fee associated with obtaining a PTIN. By following these steps, you ensure that you are properly registered as a tax return preparer, allowing you to assist clients with their federal tax returns.

Getting a Social Security Number:

If your client is an American citizen, they should already have an SSN assigned to them.  The SSN is prominently displayed on the original Social Security card issued by the Social Security Administration, a nine-digit number identifiable on the card. Additionally, individuals with a "my Social Security" account can access their Social Security Statement online, where the SSN is provided. Common tax-related documents, including W-2 forms, Social Security benefit statements, and previous tax returns, also contain the SSN. Employer records, such as pay stubs, and financial documents like bank statements, may display the SSN. For those enrolled in Medicare, the Medicare card is another source.

It's important to stress the need for careful handling and limited sharing of the SSN. If your client encounters difficulties or has security concerns, direct contact with the Social Security Administration is advisable for guidance.

If your client does not have an SSN, they must first ensure they meet the criteria to apply for one. This typically includes being a U.S. citizen, lawful permanent resident, or individuals with specific work visas. Gathering essential documents, such as a birth certificate or passport, along with proof of citizenship or immigration status, is crucial.

The next step involves completing the Application for a Social Security Card (Form SS-5), which you can get from a local Social Security office or online. Unlike some processes, SSN applications must be submitted in person at a Social Security office. Upon submission and approval, the applicant will receive their Social Security card by mail, displaying their unique nine-digit SSN.

It is important to memorize the SSN and keep the card secure, as it serves a fundamental role in various aspects of life, including employment, financial transactions, and tax filing. It's advisable to check the Social Security Administration website or contact a local office for specific details, especially if the individual falls into certain non-citizen categories or holds specific visa types.

Getting an Individual Taxpayer Identification Number (ITIN)

For an ITIN, initiate the application process by completing Form W-7, specifically designed for this purpose. Alongside the form, you must include supporting documentation that serves to verify your identity and foreign status. Once the form and documentation are ready, submit your application by mail to the address provided in the Form W-7 instructions. This meticulous process ensures that the IRS can properly authenticate your identity and assign you the appropriate ITIN for federal tax purposes.

You can also apply for an ITIN in-person—IRS-authorized Certifying Acceptance Agents and Taxpayer Assistance Centers are available for direct meetings, which are even more secure than mailing your sensitive documents physically. You’ll receive your ITIN via mail once the IRS has processed your identifying documents.

Getting a State Tax Identification Number:

When it comes to a State Tax Identification Number, the process may vary depending on the state where your business is located. Begin by checking with the state's revenue agency to understand the specific requirements. The procedures for obtaining a state tax identification number differ among states, and some states may issue this identification as part of the broader business registration process. By directly consulting with the state's revenue agency, you can ensure compliance with state regulations and obtain the necessary identification for state tax purposes.

Summing it All Up

Understanding the various tax identification numbers, from FEIN and EIN to PTIN, SSN, ITIN, and State Tax Identification Numbers, is fundamental for both tax preparers and their clients. Navigating this complex web of identification numbers is crucial for effective tax preparation. This discussion has aimed to demystify the terminology, explaining the importance of each number and providing guidance on their acquisition.

• To obtain an EIN, the preferred method is applying online through the IRS website, but alternative options like mail or fax are available.
• Preparer Tax Identification Numbers (PTINs) can be obtained online through the IRS website, with careful consideration of any associated fees.
• Social Security Numbers (SSNs) are typically assigned to American citizens, and the process involves accessing the number through various documents or applying in person if needed.
• For Individual Taxpayer Identification Numbers (ITINs), a meticulous application process, including supporting documentation, is required.
• State Tax Identification Numbers vary by state, necessitating consultation with the state's revenue agency.

By following the outlined steps and understanding the importance of each identification number, tax preparers and clients can confidently navigate the intricacies of tax identification. Whether establishing a tax preparation business or assisting clients with their tax needs, this comprehensive guide aims to empower individuals in handling tax identification numbers effectively.

For further details and official guidelines, please refer to the IRS official website, where you can find comprehensive information on obtaining EINs, PTINs, and other tax-related matters. Additionally, specific details about Social Security Numbers (SSNs) can be accessed through the Social Security Administration's official website. These reliable sources offer up-to-date and accurate information to ensure compliance with tax regulations.